Cash is making a comeback

Just when you thought ‘institutional investors’ (people or companies that have purchased at least 10 properties in a calendar year) appear to be gradually pulling out of the housing market, new data shows that 43% of all residential sales the 1st quarter of 2014 were cash sales. Yes, well, these institutional investors have pulled back, buying 5% of all houses in the1st quarter, down each quarter for the past year. Who then is buying with cash? It’s the international buyer. From Europe to China, homes are being sold for cash. I remember a few years ago reading an article about the value of the Russian ruble (their currency) and how it was dropping dramatically. In an interview, a Russian lady said “I went out and paid cash for a Buick because I know I will still have something in 5 years from now”. If your countries economy is weak and your currency is dropping, USA properties appear to be a safe haven. Look at property values in London, Tokyo, Beijing, etc and you can easily see that USA properties look very cheap. Major metro areas where over half of all property sales were done in cash included Miami, New York, Columbia, S.C., Memphis, Detroit, Atlanta and Las Vegas. While many experts are surprised by these numbers, we think until the economies of the world improve you will keep seeing foreign cash buying real estate. We have blogged many times in the past few years how foreign buyers of US Treasuries have helped keep interest rates low, now with more cash available they are buying real estate.